Almost daily, the supply chain changes due to geopolitical issues. While this makes planning difficult, there are some strategies to get ahead of the next roadblock. 

McKinsey & Company offers advice in a recent article, Chokepoints: How to respond when the global economy gets squeezed.

The firm points out that its research indicates that many companies still lack true visibility beyond tier-one suppliers and the next five years. This translates to an inability to understand which supply constraints matter when facing potential chokepoint disruptions

"Chokepoints can hide across all tiers or in service dependencies that are not readily visible, which means it’s incumbent upon leaders to map not only suppliers and production sites but also transport corridors, substitute specifications, inventory cover, and customer-level service commitments," the authors said.

Strategic Analysis

Even before disruption occurs, leaders should ask themselves the following four questions about their potential exposure to critical chokepoints:

• How exposed am I to this chokepoint? More specifically, what inputs are being purchased, what’s the value of products being sold, which funds are being moved, and so on?
• How much of my exposure could be rerouted if this chokepoint were pinched?
• How much of my exposure could be replaced by other sources if this chokepoint were pinched?
• How much of my exposure could I replace with a substitute product if the chokepoint were pinched?

Once these questions are answered, companies can build the core capabilities needed to adapt using the following five steps:

Identify scenarios. Leaders can identify and model thorough chokepoint pinch scenarios to understand how disruptions could unfold and which effects could be most relevant to their organizations. Analyses of scenarios should include identifying third- or fourth-order effects that may not materialize for weeks. Assessments should also consider the value at stake for the organization, including estimates of revenue, working capital needs, compliance, and effects on customers across scenarios.

Create playbooks. Using these scenarios, organizations can develop playbooks to operationalize responses—complete with action owners, cost estimates, prescribed actions, trigger thresholds, and decision rights. Leaders can make more accurate, real-time decisions with this understanding of the value at stake in each scenario, the estimated cost required to execute a response, and the range of available levers.

Monitor. Organizations can establish a framework for monitoring chokepoints, using defined metrics, thresholds, and real-time data sources to track when each scenario is becoming reality. Establishing an up-to-the-moment understanding of chokepoint status is a prerequisite for assessing when to activate playbooks in response to disruption.

Build agility. Leaders can stand up a cross-functional nerve center to manage the organization’s assessment and response. This team—often integrated across risk management, supply chain, compliance, operations, and other functions—can provide rapid analysis and decision-making, develop and execute on frameworks for monitoring chokepoint pinches and other disruptions, maintain and update scenarios and playbooks, and take on tasks that are often performed disparately across the organization.

Having such a nerve center in place can make all the difference in an organization’s ability to respond effectively and rapidly to disruption.¹⁴ Indeed, it can be the building block for an agile organization—one with the speed and flexibility to adapt and ensure business continuity in a world defined by chokepoint pinches.

Rehearse. After establishing scenarios and playbooks, organizations can regularly rehearse and update their scenarios and playbooks by having leadership conduct table-top simulation exercises that will allow them to build their quick-response muscle. The nerve center team can orchestrate these sessions and update responses based on the simulations’ findings.